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Australia vs. USA Bond spread (For beginners)
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Australia vs. USA Bond spread (For beginners)

  #1 (permalink)
Papa Hodler
Sydney, Australia
 
Futures Experience: Master
Platform: TT & CQG
Favorite Futures: Bonds of every country (AU/UK/CA/EU/US), Commodities (Soft, Hard, Metals), Currencies,
 
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Australia vs. USA Bond spread (For beginners)

I've come from EliteTrader and there's a lot of filth there so I'm here to start contributing. I've day-traded for 6-7 years so I have a lot of free advice to offer.

Anyway, a very common spread that Australian local prop shops do here is called the Ten-Ten.

It's just hedging the Australian 10-year bond with the U.S. 10-year bond. I'll consider this a beginners trade.


Here is the DV01 chart (DV01 means, for every 2 HXS ticks the T-Notes will go 5.1 ticks roughly for the basis point)
Colour code:
RED = ASIA SESSION
BLACK = EUROPEAN SESSION
BLUE = USA SESSSION


The Australian Bonds are known to be one of the longest traded bonds in the day (in terms of hours per day). I have filtered it for easier display here.

Tips: If you look closely, you'll see that a lot of the "spikes" and rough moves are done on the red lines. This is the Asia session. The T-notes are more-so in Sleepy-Mode and the Aussie 10-year cash products are moving a bit around, adjusting to data (like GDP, CPI, RBA Minutes) or just being f@ggots overall.

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It is a very simple beginners spread. Are there lots of ways to trade it? No, but a lot of people think there is.

You will generally find that 70-80% of people are in the same position at the same time. What seems to work is that Australia stretches beyond America and they will take the other side of this.

Of course I can go a lot deeper but this is a great introduction for now.

This spread is heavily algo'd. But it doesn't mean you can't make money. You just need to widen yourself a bit.

I used to trade this off 5-min line charts and was popping in and out of it every day. But markets evolve and you need to adapt to.

Ratio/Spread Tick and Hedge Calculation:
Aussie HXS/XT 10yr Tick = $51au per 1-lot = $102au per basis point x 0.75 = $76.50 USD
USA TYA Tick = $15.625 = $78.125 USD

Ratio is about 1-lot to 1-lot



This is the DV01 ratio. I can make another thread showing how to adapt to market conditions with a 'safer' ratio for hedging. This DV01 ratio is better used for Asia/Europe session and not holding through USA. More on this later.

If the HXS goes 2 boxes, you need TYA to go about 5 boxes for your spread to still be scratch.

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# # # # # # # # # #

Another tip: If you're starting to trade it, you have to watch the Aussie dollar. The Aussie dollar will often have a lot of cheaters and cheap bank f#ckwit c*nts who CHEAT (yes CHEAT) and front-run the RBA or front-run news. They were even caught out front-running the RBA, three Central-Bank announcements in row (about 15-30 seconds before the rate decision), but the news cycle mysteriously disappeared and the RBA just stopped talking about it.

Yes there are cheaters in the Aussie dollar and never trust the RBA. They should be renamed to the Reserve Bank of ASSLICKERS

What this means for you; Always have the Aussie dollar up, if you see a big currency move then you should be mindful of the Aussie 3yr and Aussie 10yrs moving along with it. This means some sort of news article came out, or some comment was mentioned, but it might not even be out to the public yet. A few minutes later, it will be though.

The RBA has leaks and cheaters and the big 4 banks (Westfags, Commoncuck Bank, Ass-NZ and National Australia Bitch Bank) all have their host of insiders and cheats. Don't worry, you can beat them because they're quite sh*t at trading. Trust me, I've been around for years, they're terrible. Out of 4 of them, only about 1 or 2 are on the ball with the forecasts and their execution strategy is terrible. It's no wonder they've downsized their trading divisions tremendously over the years.

That's why most of their trading divisions have had to close down, they simply can't make money, even with insider information consistently. If you feel bad for not being profitable, imagine being a Billion dollar bank with insider price-action and RBA information and STILL being shit at trading!


The Aussie dollar; be aware of it if it moves if you're trading the AUS/US 10-year bond spread.
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By the way, if you are skeptical about how much the local banks here are cheating, here's a recent article I pulled up in 4 seconds from google; Inside ANZ's toxic culture: the high-octane world of dealing rooms | afr.com


Last edited by s0mmi; November 29th, 2017 at 12:55 AM.
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  #2 (permalink)
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  #3 (permalink)
Elite Member
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Foreign bond mean regression trades against the US equivalent is a great trade. The trick is knowing when to step away.

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  #4 (permalink)
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So are u trading the exchange spread either for breakouts or for mean rEversion.. me as I would love to learn to scalp spreads and have reads quite a bit but there seems no clear way to start? Do I use simple techniques with tech analysis. Do I look for anomalies statically based on the curve? Do I stick to just say the 12 month Dec spread on crude? Any thoughts would be welcome I have cqg as well but still retail commissions which is a hinderence to true scalping


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  #5 (permalink)
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Also I think HXS is only on Ice right?


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  #6 (permalink)
Papa Hodler
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jokertrader View Post
So are u trading the exchange spread either for breakouts or for mean rEversion.. me as I would love to learn to scalp spreads and have reads quite a bit but there seems no clear way to start? Do I use simple techniques with tech analysis. Do I look for anomalies statically based on the curve? Do I stick to just say the 12 month Dec spread on crude? Any thoughts would be welcome I have cqg as well but still retail commissions which is a hinderence to true scalping


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HXS = Australian 10-year bond, its on ASX (Australian Exchange)

It's not an exchange spread. This is why there is some perceived value in it, because you have to construct it yourself (which is what I've done here already for everyone)

How to start
Because we are in such low volatility, it is very hard for newbies. In this environment, you should be looking for high-probability/low frequency trades to keep you surviving in the game.

I have provided 1 spread here, so adding it to a pool of trades is the best way to stay around. I'm giving you anecdotal evidence from the most profitable teams/people I know right now... unfortunately, I don't know of any Futures product that is easy to start. The easiest would be bitcoin, hence why a lot of trainees/firms are putting kids on it to start.

You should go to www.forexfactory.com and be aware of the following figures that can stretch the spread dangerously;

1. RBA (Australia)
2. FOMC (America)
3. CPI (Australia)
4. CPI (America)
5. U.S. Jobs (NFP)

These are the big ones. We are sensitive to these figures.

The best characteristic about bonds is that once you start to learn about figures/movement/duration (short-end vs. long-end movement), you can apply them across countries.

Australia vs. USA is one of the easiest and simplest because Australia is open for long hours and doesn't re-price one-way, and has mean reversion.

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  #7 (permalink)
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This is interesting and I'm subscribed to this spread! I heard yesterday that (I think) the US 2 year yields are higher than the AUS 2 year yields for the first time in a while. Im somewhat new to looking at yield curves and have never looked at AUS-US relations, but am wondering if this is a kind of "break out" signal or more of a reversion point?

Thanks for sharing all this on here,
Cheers,
GH!

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  #8 (permalink)
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s0mmi View Post
... What seems to work is that Australia stretches beyond America and they will take the other side of this.

It would be great to hear more about this. Is this part of your trading strategy on the other forum, or something new?

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  #9 (permalink)
Papa Hodler
Sydney, Australia
 
Futures Experience: Master
Platform: TT & CQG
Favorite Futures: Bonds of every country (AU/UK/CA/EU/US), Commodities (Soft, Hard, Metals), Currencies,
 
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adam777 View Post
It would be great to hear more about this. Is this part of your trading strategy on the other forum, or something new?

EliteTrader is where I started posting because I didn't know this place existed. Its a cesspool of junk.

This is definitely 'part' of my strategy but of course I cannot reveal anything until I take my pounds of flesh from the market first.

In trading, you got the 3 i's:

1. Innovators
2. Imitators
3. Idiots

The idiots are people who are still doing things that are proven to be insanely dangerous, difficult, or not worth time (e.g. buying $5000 courses to teach you Market Profile, trading without back-testing anything, following the word of someone else on a trade with no homework)

The Imitators is RARE gold nugget that I hope to provide with my posts and contribution. I have posted a lot on Elitetrader (username is s0mmi). Imitators could also be a trend-rider. People trading CryptoCoins right now are part of the Imitator group, they want to cash in. Eventually, when enough time passes, this goes down the drain into the idiot realm. A game of hot potato. But anyway, I try to teach (in my posts on elitetrader and here) how to identify the imitator, whats worth imitating, and a lot of tools around.

The Innovator strategy is of course, behind the cloaks and will always be. No-one will ever share their innovations because its their bread and butter. I cant teach anyone how to Innovate unfortunately. I dont think anyone can truly do this, because Innovators are probably only like 1% of the market.

The strategy I share with you, if you dont do any research, its in the "idiot" category because the edge is marginal. This is what I used to make money back in the day. I even had scum 'fake new traders' messaging me asking me for help.
It turns out they were PHD f*ckwits from Europe who were employed by Statistical/Algo firms and looking for new countries to come visit and shark a market.


I dont mind that this happened though, it was inevitable.

Considering the way I have constructed my post/strategy...I have also advocated personal back-testing and research with it, this adds to the validity of it all.

There is no further information on the internet with any of the stuff I post. I really wish there was. I do not mind giving away material here, because they are snippets.

If only we could read books and posts about this stuff... if only.... well, then it probably wouldnt work anymore.

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  #10 (permalink)
Elite Member
Australia
 
Futures Experience: Beginner
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I've spent the last year reorganising my day job so I can devote more time to this.

I've already been though all your posts on both forums and have seen how things have changed a little. Now I'm looking forward to getting started with the cqg sydney data to do the research, instead of just US data. You did say this was a beginners thread


Last edited by adam777; December 21st, 2017 at 03:15 AM.
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